This week can’t help but please investors as their worst fears were alleviated on the most recent economic data. Tuesday was the best market day in a year, with the S&P 500 adding 2 percent. While yesterday the market gave up some of Tuesday’s gains, today’s action was again very positive, on strong earnings reports, good news from the labor front (fewer Americans filed new unemployment claims than at any point since 2000), and on indications of stronger growth in Europe.
We got off to a weak start on Monday when International Business Machines (IBM) was the market’s, laggard, after the technology giant reported a disappointing quarter and pulled its long-standing earnings target of making $20 in adjusted EPS in 2015. An unprofitable chip unit is being sold, or, rather, disposed of, as IBM has to pay $1.5 billion to Globalfoundries, Inc. to take it off its hands. Read more about A Very Strong Week 10-23-14
The U.S. stock market is riding a rollercoaster at the moment. Even intraday trading, including today’s, looks like a fast-moving ride at the fun fair. However dizzying it may seem though, it would be wise not to panic or let seasickness overcome you.
Yesterday, the market averages dropped significantly in reaction to disappointing economic data—but not without substantive moves up and down in between as the benchmarks recovered some of the heaviest losses of the day. Similar to yesterday’s action, today the main indices managed to pare the losses. All said, however, shares that comprise the large-cap S&P 500 index are down about 7 percent since their September 18 peak.
Let’s face it: growth jitters are the main culprit. Yesterday, for instance, manufacturing numbers in the state of New York missed expectations, and retail sales posted a decline for the first time in eight months. Read more about All About Growth 10-16-14
The S&P 500 Index, which had declined to an eight-week low on Tuesday, rose yesterday by the most this year, as stocks jumped after the minutes of the September meeting of the Federal Open Market Committee were released.
The key to the U.S. market rebound was the Fed’s retention of its language promising that it would maintain low overnight lending rates for a “considerable time” after ending the record, expansionary bond buying program. The details of the Fed discussion confirmed that the central bank does not plan to raise overnight lending rates any time soon, and assuaged fears that we might see higher short-term rates as soon as in six months.
The need for patience stems from two sources: the strong U.S. dollar and the global slowdown. Fed officials see the potential for further dollar appreciation, resulting from the European economic slowdown and low inflation. Read more about The Minutes that Impacted the Market 10-09-14
The late September departure of PIMCO bond guru William Gross from the giant fund and company he had co-founded led Morningstar to swap its “gold” quality rating to a lower-grade "bronze" for the company’s flagship PIMCO Total Return Fund due to the “uncertainty regarding outflows and the reshuffling of management responsibilities.” While investors withdrew more than $23 billion from the fund in September—the largest single month withdrawals for any fund in history—on October 1, PIMCO Total Return alone still managed roughly $200 billion and withdrawals had already slowed “considerably.” Read more about A PIMCO Story 10-02-14
In a busy month, we are making changes to all of our portfolios.
In the Mutual Funds Portfolio, we swap out one emerging markets fund for another. In the Growth & Income Portfolio, we recommend selling and taking gains on a tech and Canadian bank stock. In their place, we recommend a new railway stock to complement our existing rail stock that has returned nearly 100 percent since joining LIP. In the High-Yield Portfolio, we review our fixed-income recommendations and recommend selling one and locking in an approximate 100 percent return (a double).
Furthermore, we discuss a variety of topics, including recommendation on how to manage one's social security benefits. Read more about The Long and Easy Road